Can "Freemium" Work? Babbel and WSJ Say No and One of Them Is Wrong

Babbel and The Wall Street Journal both turned away from the Freemium model this week. The outcome will be drastically different for each.

Babbel, a language-learning site, came out of beta today with a surprise: It will be charge between $6.65 and $11.95 per month for access, according to TechCrunch. "Freemium doesn't work for us," the startup's director told TC.

It's not for want of funding, either. Babbel held two successful rounds of funding in Europe, winning at least $1 million euros in total. But the subscription model allowed the company to do away with unsightly advertisements on its site, and to license higher-quality content from language publishers. The site's principals are also hoping that a locked-in subscription account will keep the average language-learner active on the site, and prevent users from defecting to a free competitor.

The second site to close down freemium access may be The Wall Street Journal online. In an interview with Sky News this week, News Corp Chairman and CEO Rupert Murdoch said he was preparing to order News Corp's online properties to include no-index code in their source, preventing Google from crawling their content and delivering it to searchers. Murdoch says he's happy to have fewer visitors to the site as long as they're paying.

As plenty of outlets like PaidContent have noted, that move will be tantamount to a self-inflicted gunshot to the foot for a variety of reasons—TechCrunch estimates that 25% of WSJ online traffic is funneled through Google News, and that the number is increasing. Right now, the Journal, which requires a paid subscription to read articles in full, allows a special loophole for complete access when readers arrive from Google. That loophole will be closed. (The Murdoch interview, below.)

So what's the difference between Babbel's approach and Murdoch's? Visits to Babbel are purpose-driven, while visits to the WSJ are topically driven. All things equal—i.e., assuming a user pays money for a subscription to the Journal and to Babbel—his motivations for visiting each are different. He probably has a routine for learning a language on Babbel; every so often, he checks back to do a lesson at his leisure. Visits to the Journal's site are different; he only goes to read their take on a specific issue. But that'll be hard for him to do when he doesn't know the issue exists. Short of visiting the WSJ every few hours, the user is reliant on aggregators and portals like Google News or Yahoo to let him know that news is breaking. If the option to click through to the Journal's take isn't there, he may not get around to checking it until he's read coverage at more accessible outlets—if he gets around to checking it at all. If he stops visiting, he'll stop paying.

Freemium is a profitable model: several studies have indicated that many Web users are willing to pay for the stuff they use, and the ones that aren't can be monetized by other means. News Corp ignores the popular consensus at its risk.